Coming into the end of February, it was quite quiet. Our phones were very quiet. And there were some conferences in January and February that we attended. And again, not a lot of great sentiment in the space, a little bit nervousness. And sometimes when it gets darkest right before it gets a turnaround. Right. And for us coming or mid April here, I’d say the beginning of March, our phones start ringing off.

Well, hello there, my friends. Chris Marcus here with you for Arcadia Economics and excited to take a look inside some of the things happening in the silver world, joined by Dan Dixon of endeavor Silver, one of the larger silver producers out there and about to get a bit larger towards the end of this year as they have a mine under construction, which, given the numbers we see about the silver supply and demand, I think will certainly come in handy.

And nice timing on when it is coming in because, Dan, we’re in the middle of quite a gold and silver rally, the likes of which I think we’re close to making it safe to say. I don’t know if I’ve seen something quite like this since 2011, but we will cover all of that. And first of all, welcome on in. And how’s everything going with you today? Everything’s going very well.

Thanks for having me. It’s nice seeing you again. And yeah, it’s been an interesting last six weeks, I’d say absolutely since 2011. I think a little bit in COVID, sort of March of 2020, with a lot of uncertainty. We saw that run in gold, not necessarily as much as silver now. Silver’s kind of picked up. So it’s been interesting last, like I say, six weeks in the marketplace.

Yeah, it sure has been. And we are recording on Tuesday afternoon here in east coast time, we see gold back over 2400 silver down on the day on Tuesday about 28 40. Yet, Dan, one of the things that seems like a big difference to me is how we’re seeing even the rally continue. Banks get short, doesn’t matter, labor report comes out strong. It’s almost like a lot of this is happening in face of the data, which is certainly something we haven’t seen much of in these past couple of years.

Yeah, I mean, it’s been resilient from a gold standpoint, that’s for sure. And I think it’s a function of all the data that we’re seeing is coming out the western side of the world and us and Canada, or for our sake, Canada here in Vancouver. But the. I think ultimately it’s coming, it’s a function of what’s happening in Asia. And Europe. And that’s where a lot of the buying was coming from, from central banks.

I think now just on the US side of the world, people are getting into, back into the story of gold, and ultimately silver will follow and it’ll lag a bit and it lagged. Now it’s shot not, but I think there’s still a long ways to go from a gold standpoint and ultimately a silver standpoint. So like I say, it’s been a really interesting last six weeks. Yeah. And you’ve mentioned that at some of the conferences that you’ve been to, you’ve started to see a little bit more fund participation in silver, more interest in the miners going to pull up.

This is our ETF’s, also includes the Comex. And we see there’s been metal flowing out of there constantly for the better part of the last couple of years, has spiked up recently. And I know you also are in contact with banks in terms of the financing of some of the projects you’re doing. Anything you could share there in terms of what you’re seeing on the institutional side right now.

Yeah, I’d say again, coming into the end of February, it was quite quiet, our phones were very quiet, and there were some conferences in January and February that we attended. And again, not a lot of great sentiment in the space, a little bit nervousness. And sometimes when it gets darkest or it gets a turnaround. Right. And for us coming or mid April here, I’d say the beginning of March, our phones start ringing off partly with the endeavor story.

Like we had really come out, that we come down in share price. We were one of the worst performing share prices in our peer group. And it’s an unfortunate thing, but I think there is a lot of story around that. It was where silver price was going, the costs and the margins that we saw in Mexico, the appreciation in the mexican peso, which increased our costs. But ultimately we’ve seen that turnaround.

I think a lot of the funds start to recognize the value that was sitting in endeavor, and we got as low as $1. 45 us per share. I think we’re just shy of dollar three or maybe we’re sitting about dollar two and $0. 60 today. So we had a significant run. And that’s all in the last six weeks. Funds started calling, like I say, coming out of February, early March.

And I’ve been on the phone for the last six weeks, almost two, 3 hours a day, with different people trying to get into or understand the endeavor story. And some people were familiar that Taran was coming online, some, some weren’t. And so like I say, guys that are starting to get caught up to speed with the silver and then ultimately endeavor story have been interested in the last six weeks.

So it’s been very positive in that sense. Hopefully it continues. My expectation is it will, but you never know. Yes, I know what you mean. In fact, I’ve been somewhat surprised we haven’t seen more of a pullback along the way so far. Although in the meantime, as that’s happening, I mean, certainly a lot of banks beginning to talk a lot about gold and silver. Citi had a report out talking about a scenario in which they see $3,000 gold.

Here is bank of America that gave an update on their gold and silver targets. Accordingly, we see yellow metal to rally to 3000. By 2025, silver prices could go above $30. So certainly a change in the environment. There’s goldman raising the price target. I guess at some level that begins to flow over to the actual funds and what the customers are doing. And certainly as I know you’re well aware, a lot of money coming into silver can make a big jump in a short period of time.

Yeah, I think from a silver standpoint, it’s such a small market. And as you’ve shown, like if gold gets to 3000, I know it had $30 on that report, but that’s a ratio of 100 to one. In bull market that ratio will be a lot tighter than 100 to one. And historically over the last 35 years, I think I’ve talked about this before, the average, the ratios average 65 to one.

Right now we’re probably sitting around 83 82. So if we see gold move through 2400 and up to 2700 or even 3000, I mean, I think that means silver runs well through $30. And that’s just based on the ratio tightening up to the 65 to one. And we’ve seen in other markets and it’s cyclical ultimately that will tighten below 65 to one, get 50 to one. So with the $3,000 gold price and a 51, you’re talking $60 silver, which means we’re making all time new highs because historically back to 2011 that you touched on silver touched $50 intraday $48 at close a day.

So we haven’t come close to that. Gold’s obviously making new highs, but silver is not there yet. And I think silver’s transitioning from being a base metal, trading as a base metal, going back to that monetary aspect and treating it precious metal. That’s when we’ll see it kind of run. There’s a lot smaller supply side now for monetary aspects as opposed to the industrial component. Silver has exploded for solar panels and electrification greenification.

So there’s a smaller piece of the pie that’s going to be available from a monetary standpoint, which again, it’s positive for the price of silver. When we really see it move in that direction, deemed to be a precious metals, which will happen. It’ll come again. Yeah, it’s interesting what you’re mentioning there, because you have that dynamic between the monetary and the industrial, which don’t know if you saw this, but there was a study by Oxford Economics where they were doing a forecast for what they expect, silver industrial demand over the next ten years.

I get it, a lot can happen in ten years, but they forecasted a doubling of the growth in industrial, so 46% over the next decade, which obviously, if we have a spark in monetary demand at somewhere in that same time, leaves for a little bit of a gap. And did you have a comment there? Yeah, I mean, a lot of the data shows that, and that’s the ultimate.

The growth from an industrial standpoint still there. And that’s happening whether it’s ten years or 15 years. I’m always a little bit more pessimistic with how fast we can move to greenification, how fast moving to electric vehicles just across the world. I don’t think it’s going to happen as quickly as some say and as we want it to. And of course we need to reduce carbon and the carbon footprint that we put out, but that takes time, and I don’t think it happens immediately or as fast as some of the establishment wants, but it’s happening.

And so that growth from an industrial standpoint just means that pie is going to be smaller on the supply side of things. Impact to actually get mines discovered and through permitting taking longer and longer and longer, there hasn’t been a big inflow of capital into the exploration side of things over the last ten years. So new mines and new supply coming on stream from a silver standpoint won’t be able to fill that gap.

That’s happening from a demand standpoint. So like I say, everything’s kind of coming to an inflection point. We’re at a pinch point coming up here where there can be a very positive movement in the price of silver for all the things that we’ve already talked about. Yeah, and that actually reminds me, I was watching an interview you did at the PDAC conference earlier today and made me chuckle when you said people are saying well, there’s a deficit in the silver market.

How come the price hasn’t risen? Which I get it, we’re not at 2011 or 1980 highs yet. We have gone up $10 from the fall of 2022. So I think we’re seeing that impacted somewhat. And I mean, we also had TD securities, they actually wrote a report a couple of weeks ago talking about the next silver squeeze, citing the same things with the deficits. And also makes you wonder, especially even if we had $50 silver for the next five years, at least based on the deficit numbers, we’re seeing how much additional production.

If you’re just guessing, even if we had that $50 level, and executives felt that was going to be the sustained price, that still would require if we’re getting 100, 200 million ounce deficits, do you think we would be able to meet that even if we were at those levels? Yeah, that’s a hard question to answer because silver as a primary metal only comes as a primary source of revenue out of mines.

Only 30% of the silver that’s produced actually comes from a mine that’s primary silver. And of course, at $50 silver, there’s a lot of the mines that have closed. You can expand operations, go into other areas of your mines, so there’ll be some that comes online. I think part of that goes from a base metal standpoint, like copper prices. What’s copper price doing? Because our end gold price, which obviously in that scenario I think would also be a lot higher in 2011 2012 range, I think production kind of peaked out at 900, 950 millionoz silver.

So I think you could probably get, if you’re sitting at $50 silver. And again, I’m just kind of speculating here, but you go from 800 millionoz produced on an annualized basis to maybe the 900 950. So almost kind of a 20% increase there. But I don’t think that offsets if silver is sitting at 50. You’ve got to get money into the ground from an exploration standpoint, development standpoint, to kind of fill that deficit.

I know last year I think it was metal focus, had about a 200 million ounce deficit. The year before that it was similar that I feel coming off ETF’s and what’s above ground. So we can fill maybe 100 million, 150 million and not short order, but relatively short order. So call it three to five years. It just shows that there’s still a massive shortfall in that space if we do end up there.

So hopefully we can sustain those prices for a bit. Again, the thing that’s very difficult to pinpoint is what’s the monetary demand, what’s governments doing from budgets? How much deficits are we running in developed countries? Those continue to grow. We got in Canada today. We have our debt, the budget announcement by our government. Expectations are low here sitting right at my desk, unfortunately. But there’s so many variables that go into that from a monetary standpoint, it’s difficult to project.

Like I say, we try to position ourselves so that it’s going to be a higher price. We have a great, a great pipeline in our portfolio behind even Terra Nara that we think we can take advantage of it. Yeah. And I guess the one easy part in there to forecast is that the debt loads are going to continue increasing and we’ll leave aside the whole Fed circus for today.

But one last thing before we turn over to endeavor that I wanted to run by you because this was Peter Kraut talking about a conversation he had with a silver mining company up at PDAC. Love to get your thoughts on this and anything else along those lines maybe you’ve been hearing. So we play that here. You know, I was at PDAC just a few days ago at investor forum and I spoke to someone who runs a large silver producer, not in North America, and they sell their product out to China and to the west.

And he told me, he said our sales to China or our sales period are so tight, the buyers are coming to us and are saying, can we have it? Can we have the product? They’re willing to pay a couple of weeks in advance of delivery and they are willing to. In China, they’re willing to pay $3 over spot to get the silver. So the markets are very tight and, you know, it doesn’t matter.

I think maybe what we see, so we’ll stop that there. But I know obviously you’ve withheld silver at certain points. Yeah. And curious, any reaction you have to what Peter said. And also if you’ve been hearing from companies directly or anything that you could share along those lines. Yeah, I mean, for us, we don’t sell specifically right into China. I sell our. We produce a dory bar out of that gets refined and becomes 999 silver that we sell through exchanges here in North America.

Our concentrate actually gets sold to traders. It ultimately gets mixed in Mexico and sent overseas. I’ve heard of not just silver price, but the gold price is a premium right now. And expect for the last couple months in China for gold, we expected that to come from a silver standpoint. We’ve heard, I haven’t heard as high as $3 but definitely a premium and that’s great. I think it speaks to exactly what’s happening and it kind of touched on early on is Asia had been running in central bank purchases of gold and Asia really being the purchasers and driving that price despite some of the data points that were coming out of the US.

And I think that’s completely true and I don’t doubt that there’s a premium there. I think eventually that premium makes its way to North America because our financial world’s phenomenal at kind of arbitrary that stuff and taking that away. So I think that will show up. As you touched on, it’s a $10 increase in silver over the last six, seven months. So I imagine that’s tightening up. But it speaks to the whole complex that we’re in right now and that higher prices are coming and I think it will continue that what we’ve seen over the last six, seven weeks.

Yeah, certainly sets up for an interesting couple of years ahead to see how that all gets resolved. And fortunately, in those years ahead, one of the things that will be happening is you’re on track to turn on the terra narrow mine. And it’s great to go there and see it in person as you’re in the early stages of construction back in November of last year, but perhaps give people an update on how things have progressed since then and still the timeline going forward.

Yeah, November seems like a long time ago. Things have gone extremely well, to be honest. I mean, obviously the biggest, the biggest part for endeavor is making sure we’re executing. And I. We came out in January with an increase in price. So the cost to build it was originally going to be 230 million and that we announced it was going to be 270 million. And that’s the headwinds that we saw in front of us in 2023.

The mexican peso appreciate it 15%. We bought ourselves some insurance of buying an additional mobile fleet to make sure we sustain 2000 tons per day. Steel prices increased. All that is now built into our projected or forecasted initial capex of $270 million. What’s positive from our standpoint is we remain on track for commissioning in q four of 2024 this year. So from a productivity standpoint, we’ve been hitting our milestones.

It’s never linear. We have good days, we have our bad days. So we’ve had a lot of good days over the last three months. Our vertical construction is going well. Steel erections close to half complete. Our ball mill, our sag mill has been placed replacing our crushers. Soon agitation tanks are in the thickner tanks being welded up. So everything’s going really well from that standpoint. Knock on wood, from when you were there in November to what you went now, it’s completely different.

We’ll have a Q one construction update coming out back half of April. Some updated video of site, like I say, with updated pictures. So the audience, I’d encourage them to see that and see how much happening the tailings dam and lower platforms. A lot of work’s happening there. Our critical path remains to be completion of our tailings dam and mine development. Mine development mainly get into a key ore body, a key specific area of the ore body, which is the plan, and it remains on track.

So it’s been good. Yeah, that’s the date it. That’s the. All that has got steel and equipment on top of it now. Yeah, none of that was there back a couple months ago, so it’s great to see how you guys have progressed there. A lot of work going into that. Yeah. That reclaimed tunnel is now complete. That’s where our ball mill and sag mill are actually sitting. We have steel all around that.

If you look back towards that mountain there, that’s where the crusher is going to be. You can see the roof, main tunnel, and that’s all. All erect it. So, yeah, those are very dated photos now, Chris. Well, I’ll look forward to seeing the new one. There you go. There’s some steel going up. Like I say, that’s done now and still on track. Production in first quarter of 2025 is the plan.

Yeah. So commissioning is going to happen in Q four and our expectations 2025 is going to be commercial production early. Q one. Now we just have to execute and you should be ready to go. Yeah. And one other thing that I was hoping you could talk about. We discussed this back in November, but the cost of producing the silver at Terraneira is certainly one of the features there.

And I’ll pull up the slide in the background, but certainly I think that’s something people should be aware of going forward here. Yeah. What makes Terraneira special for us is it’s ultimately the cash flow and it’s 60% of the revenue comes from silver, 40% comes from gold. At $1,800 gold, the gold pays for all the silver production. So here we are sitting at 23, 50, 23. 75 gold.

Cash flows after tax. Over the ten year reserve, life is close to $55 million. Using $23 silver, $1,800 gold. At today’s prices, you’re approaching well north of $80 million of after tax cash flow. So over the life of the project, we’ve got ten years proven out. We expect to be here 15, 2025 years before it’s all said and done. So Seranera is going to be a very special project for us, especially in today’s price environment.

In a higher price environment, even better, of course. So we’re excited, of course, we’ve got to execute and get this thing in production for next year and completely changes kind of the landscape of endeavor silver and what we’ve historically been and allows us to further build. I mean, our goal is to be a senior silver producer. That’s what we think. Kind of 25 millionoz of silver production, or silver equivalents with gold.

We have a project behind that called Pithuria. It’s got 600 millionoz of silver in resources, plus zinc and lead. And we’re looking to move that along and move our development team from Terraniera to Pithoria. So we have a nice pathway to get there, a nice pipeline to take advantage of the market we’ve talked about today. Yeah. And one thing you mentioned in there, the ten year life of mine at Terra Nara, and we’ll get back to Piteria in a second.

But that’s 4 millionoz of silver, 38,000oz a year of gold. If you do end up being able to extend that to the 25 years more in that direction, how does that change those annual production numbers? Would you expect something similar in the or in the years eleven to 25? How would that look? Yeah, I mean, it’s all speculation. We have inferred resources as we get deeper into the ore body.

The Terran air veins open along, strike into depth. From a cost benefit standpoint, it doesn’t make sense to start drilling that until we get there. So we’ll be able to kind of help start defining that out. Because of the topography, you’ve been there, it’s quite mountainous. We had to cut off the area. The plant scale right now is 2000 tons per day. The expectation is if we continue to move on and add life, it would be eyeing 2000 tons per day to be as efficient as possible through that plant.

So the expectation would be similar. Production profile again, we have the lelous vein. There’s a number of veins that we’ve drilled out back in 20, 2021 with high mineralization, over 400 grams silver equivalents. Terranera is the main structure. It’s five and a half meters thick on average, over that ten years, shallow again, open, long, strike into depth. 90% of that ten years comes out of terranera. It’s like our other mines want us to be bologna.

We’ve been there 18 years, 17 years respectively. Never had more than two year reserve life and epithermal vein systems. You can continue to come down. Sometimes they pinch out, but ultimately it’s another bead on the necklace, so to speak. There’s work to be done. There’ll be some exploration. Exploration dollars to be spent, but lots of opportunity in the district. And if we can maintain that 2000 tons per day.

You’re looking at a similar production profile, hopefully a similar cash flow profile. Just depends on the grades that we bring in. Okay. And the other question I had back to Piteria where you mentioned you have the 694 million ounce resource there. Any idea yet what the cost structure is going to be looking like at Pituria? Yeah, I don’t want to say no idea yet because it sounds like I don’t know what I’m talking about.

So we have a little bit of idea, but it’s all still internal right now. We put out a resource, it is a historical resource that silver standard or SSR mining ultimately put out. We confirmed all those numbers, put it out under 43101, which is canadian regulations of how we speak to this. We are drilling what we think are feeder veins into the deposit. And we’re looking at this from an underground mine development standpoint.

We’re underground vein miners. That’s what we know, it’s what we understand in Mexico. And the rhetoric happened in Mexico is it’s anti open pit mining right now. Amlo’s government, the Marina party, they’ve been in power now for five and a half years. There’s an election coming up in June. The expectation is Claudia Scheinbaum is to win that election. With the Moreno party getting back in. I’d be concerned that anti open pit mining rhetoric will continue.

So we’re looking at from an underground standpoint. In 2009 there was an underground pre feasibility study completed by silver standard that was published, that was done in $11 silver cost profiles then to now significantly different. But we think this will be a low cost mine operating mine because of the. The scale be about 3000 to 4000 tons per day grades. It’s like I say, grades would run about 175 grams.

200 grams if you look at just the sulfides and contain into a vein system. So again, the volumes will be the key here. If we can be a 3000 4000 ton per day operation that will really drive down costs and make this a low cost producing mine as well. Again, under the PF’s that was published, Silver Standard had about 7 millionoz of silver, plus zinc and lead per year.

Again, that was at $11 silver when they put that study out. So world’s completely changed. We got to get through that. We’ll do an economic study in 2025 and hopefully have it published next year. Okay. Well, always good to see that there’s something else in the pipeline. Even though I know we’re still. Still finishing up construction on number one, so we won’t jump too far ahead. Well, the last one I had for you here is that after the construction of Terranera, you’re looking at drop of all in sustaining costs from about 22 down to 13.

Does that sound right? Yeah, that’s about right. I mean, all that, what we’ve always said about Terranera is it effectively almost doubles our production and cuts our cost profile in half. And again, using the cash costs and all sustaining metrics that are by product credit basis. So the gold pays for the silver, the silver cash costs are negative. At Terraneira, all the sustaining costs of these prices would be negative.

So that’s ultimately bringing that mine into production. Takes us from one of the higher cost producing companies to one of the lower cost producing companies. Again, why everybody’s interested in endeavor right now is the idea that if we can execute and get Terra Nir online completely changes our cash flow profile. Obviously makes a good investment when you have that type of cash flow behind the company. Yeah, certainly does.

And it’s really nice to see the way things are lining up. We’ll see what the price of silver is and by the first quarter of 2025. But it’s great to see you’re doing what you have control over and bringing a low cost mine on at the same time. All the other conditions we talked about are falling into place. So. Well, when we did the feasibility study and made the construction decision on terranera, I mean, we estimate a $17 silver price, 18 or $1600 gold.

So higher price is only positive for the project. And we have foresight into that and kind of make those decisions going, okay, this is what it is. We’ll make money at these prices, but what will prices potentially look like? And I’m glad to know that we’re hopefully bringing this mine into what’s a bull market for silver and gold. And I can say it will set us up to do very well over the next couple of years.

That’s for sure. Well, congratulations again on that. And Dan, can you just let folks know if they have questions? What is the best way to get in touch with you guys. Yeah. The best way to get in touch with us is probably through our website. We have a link that you can go to get you in touch with our VP of IR and our IR team that will ultimately get back to you with any questions that you have.

So by all means, we have a lot of data through our website about us, but if you have any specific questions, you can go through our website to task those. Well, appreciate that. And again, we’ll be keeping an eye on not only silver, but also the progress of the mine. And seems like you’re on track for some good times ahead. And again, congratulations on having the timing go right in your favor as well, and it’ll be fun to follow in the months ahead.

Awesome. Thanks, Chris. Thanks for your time. .

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